15 June 2014

Fear of housing bubbles

  15 June 2014

By THE STAR
THE International Monetary Fund’s (IMF) unveiling of comparative data on house prices underlines its concern over possible property bubbles in the financial system.
“Our research indicates that boom-bust patterns in house prices preceded more than two-thirds of the recent 50 systemic banking crises,’’ said IMF deputy managing director Min Zhu in a blog post.
With houses selling for more than four times the average household income, the IMF said the ratio in Australia was much higher than its historical average.
A 24-country comparison showed that Australian homes were behind only those of Belgium and Canada when judged by this measure, said the IMF on its website.
In order to prevent housing markets from overheating, the IMF recommends governments consider rules to rein in riskier bank lending, which Australia has so far avoided.
More than 20 countries had adopted “macro prudential’’ policies such as caps on low-deposit loans or debt-to-income ratios in recent years.
In view of this data, Australia should hear the alarm bells and undertake some pre-emptive measures related to risky bank lending.

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